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Labour's surrender to austerity

In June Ed Miliband and Ed Balls signalled that a future Labour government will accept the framework of the Tories' austerity plans and put a cap on welfare spending. Iain Ferguson looks at Labour's shift to the right and challenges the myths about the welfare state used to justify this turn.

"Even in these hard times, is it too much to expect an opposition to oppose now and again?" (Sunday Herald, 16 June).

For historians of the British Labour Party, June 2013 is likely to be remembered as a key milestone in Party's political and ideological evolution.

Politically, it was the month in which Party leader Ed Miliband and shadow chancellor Ed Balls gave up any pretence of resistance to the coalition's austerity agenda, including even the "too much, too quickly" rhetoric of the past three years. Instead, in a series of well-publicised speeches, Miliband and Balls confirmed that a future Labour government would work within the spending framework laid down by chancellor George Osborne, and would not seek to reverse any of the welfare cuts imposed by the coalition.

Ideologically, June saw a huge retreat by the Labour leadership from the principle of universalism which has underpinned the welfare state from its inception. As recently as January, Miliband had argued that "universal benefits are an important bedrock of our society". In stark contrast, in a speech on 3 June, Balls announced that a future Labour government would halt winter fuel payments for "600,000 of Britain's richest pensioners" - in other words, the benefit will now be means-tested. As commentators were quick to point out, it is the symbolism that counts. The resulting savings (£ 100 million) would be miniscule in terms of overall welfare spending.

Farcical credibility
The justification given for these U-turns - that they are necessary in order to improve Labour's "credibility" and electoral prospects - is farcical. Given that they fly in the face of everything that the Labour front bench has argued since 2010, the opposite will be the case. In reality, they are likely to have a profoundly demoralising effect both on the party membership and its wider working-class support.

Not surprisingly, Miliband felt obliged to propose some radical-sounding measures as a fig leaf to cover the abandonment of key policies and principles.

So, for example, bankers' bonuses are to be taxed, "so we can guarantee work for young people who have been out of work for more than a year". Taxing bankers' bonuses is long overdue and should be welcomed. Likewise, tackling youth unemployment, which rose by 50,000 in the first three months of this year and is now close to a million, should be a national priority.

Quite how Miliband's proposal will guarantee work for young people is far from clear, however, since the policy seems to involve even more subsidies to private industry rather than creating jobs in the public sector.

What is guaranteed, however, is that young people who do not take the jobs on offer, whatever they are, will see their benefit stopped.

Also welcome is the proposal to impose a mansion tax and use the money to bring back a 10p starting rate of tax. Before anti-bedroom tax campaigners get too carried away, however, and think that Miliband has finally embraced the slogan "axe, axe the bedroom tax, bring in a mansion tax", it seems the proposal is an addition too, not a replacement of, the bedroom tax. Presumably this is what is meant by everyone "accepting responsibility" in Labour's "One Nation" Britain - tax adjustments for the very rich, benefit cuts and evictions for the poor.

The most bizarre feature, however, of Miliband's unconditional acceptance of the coalition's cuts programme and his party's shameful retreat from universalism is his attempt to justify these U-turns by invoking the "spirit of '45", and suggesting that New Labour's new-found embrace of austerity is on a par with the actions of the post-war Labour government of 1945-51, headed by Clement Attlee.

There are many criticisms that socialists can make of the Attlee government. For example, on 18 occasions between 1945 and 1951, that government sent in troops to break strikes by trade unionists. Mines, railways and other industries were nationalised but the same hierarchical relationships between management and workers continued, often under the same managers as before. And before the government had lost the election to the Conservatives in 1951, prescription charges, dental charges and optical charges had been re-introduced in the new NHS.

From Atlee to Balls?
To suggest any resemblance, however, between the reforms of the post-war Labour government and the "reforms" which Miliband and Balls now tell us a future Labour government would introduce is ludicrous for three reasons

First, the principle of universalism was at the heart of the health and education reforms introduced by the Attlee Government. A recent study by the Jimmy Reid Foundation, a left-wing think tank in Scotland, has highlighted some of the reasons why universalism continues to be so important. It means, for example, that everyone, including the better-off, feel they have a stake in the welfare system, one reason why the NHS has always enjoyed huge popular support. As the report's authors argue: "Where social services are rationed for those on lowest incomes, the quality of the services decline without 'majority buy-in' for these services - or as two other writers put it, "services for the poor will always be poor services".

In addition, universal benefits are actually more efficient than means-tested benefits. They are easier to operate, less vulnerable to fraud and cheaper to run. As an example, the Department of Work and Pensions' estimates for the means-tested pension credit suggest that overpayment through fraud stands at 1.5 percent, customer error at 1.5 percent and official error at 2.1 percent, making 5.1 percent altogether. By contrast, the equivalent figures for the retirement pension, delivered to much the same client group, and which simply continues as long as the person is alive, are 0.0 percent, 0.1 percent and 0.0 percent.

But perhaps the main argument for universal benefits is simply that everyone gets them - not just the poor - so there is no stigma. Many of us can remember the embarrassment felt by kids claiming free school meals, which is why the attempt by the Scottish Socialist Party in 2003 to introduce a bill giving free school meals to all children was so important.

Re-introducing selective benefits in areas such as winter fuel allowance or child benefit, as Miliband and Balls in England and Johann Lamont, leader of the Scottish Labour Party, are proposing, would undermine all of these benefits, and would inevitably be the start of a slippery slope towards selectivism in welfare more generally.

Double-edged reformism
The Attlee Government's reforms were important too for a second reason, summed up by Tony Cliff and Donny Gluckstein in their history of the Labour Party, namely, that they strengthened reformist consciousness within the working-class. Reformist consciousness is double-edged. Negatively, it means that workers think they can improve their lives without the need to overthrow capitalism; positively, however, it means that workers believe that not only is reform possible but that they have a right to the fruits of these reforms.

"Many of the gains of 1945-51 were not especially due to Labour's efforts, yet the period planted the idea in the working-class that workers had a right to a job, a right to decent housing and a right to health. It was society's duty to provide them" (Cliff and Gluckstein, 1988: 254).

The fact that David Cameron still feels the need to attack what he calls "the culture of entitlement" shows how deeply rooted within the working-class the idea of welfare services as a right continues to be, and why Balls and Miliband's attack on universalism is so damaging.

The final and most obvious difference, however, between the reforms of 1945-51 and those proposed by Miliband that the post-war reforms made people's lives better. For the first time, working-class people could access free health care and obtain free dentures and glasses. The fear of illness, of unemployment and of old age which had dominated the lives of working class people up till then had not completely disappeared, but it was considerably reduced. By contrast, the cuts in services and withdrawal of benefits proposed by Miliband will make life much, much harder for many millions of poor and disabled, half a million of whom are already dependent on food banks.

The fact that the leadership of the Labour Party on both sides of the border can see no alternative to cuts and austerity reflects two kinds of pessimism.

First, is a pessimism about the possibility of challenging reactionary ideas within the working-class, whether over anti-immigrant racism or hostility towards benefit claimants. With one poll appearing to show that 79 percent of people support the coalition's cap on benefits, Miliband and Balls clearly believe that, in electoral terms they have no alternative but to pander to these ideas. Yet an important TUC study carried out last year, while showing widespread ignorance about benefits, also showed that, when people are presented with the facts, their ideas can change.

So, for example, a big three-to-one majority of the general sample (64 to 21 percent) thought that the benefit cap would mainly hit the unemployed. When told the cap will affect low-paid workers, majority support for the cap turned into majority opposition (40 to 30 percent). There was also a sharp fall among those with the least knowledge - from 54 percent backing the cap before being told about low-paid workers' benefits, to 32 percent afterwards.

Gaining real support
If the Labour leadership was to seriously challenge the Tory myths about benefit scroungers, it could gain real support, not least among the millions of low-paid workers who now make up the majority of those on benefits.

Second, Balls' and Miliband's acceptance of the coalition's cuts and austerity programme reflects another kind of pessimism. It is the pessimism that says that that there is no ideological alternative to austerity and to making working-class people pay for a crisis they did not create, through the dismantling of the welfare state. This, despite all the evidence from across Europe that austerity not only isn't working but making the crisis worse. There is an alternative to such a counsel of despair, however.

At one point in his speech to Labour's National Policy Forum on 22 June, Miliband argued: "We need to stand up, not succumb, to the powerful interests that hold our economy back". Taking that argument seriously - for example, by taxing companies such as Google and Amazon that pay almost no tax - would be the basis of a different kind of response to the crisis that would prioritise protecting the interests of the poor and disabled instead of the bankers and the multinationals, and would instil hope instead of the despair that will be the inevitable result of Labour's latest U-turn.